VFS Global needs to be scrutinised by the competition regulator

Historically, the provision of CPV services was solely undertaken by the Government of India. However, in 2006, the Ministry of External Affairs decided to outsource these responsibilities to external service providers. In this manner, the provision of CPV services shifted from being a sovereign function to an economic activity undertaken by private outsourcing agencies.

These outsourcing contracts are usually exclusive in nature, such that the foreign embassy of a particular country would authorise a specific service provider to undertake the CPV services of that country. For instance, a consumer planning to visit Australia will have no option than choosing VFS Global for availing CPV services since it’s the sole authorised CPV service provider by the Australian Government.

Further, even though other entities such as travel agents or consultancy firms also offer CPV services, they cannot directly contact the embassy and must still approach the authorised outsourcing agency. This suggests that unauthorised service providers of CPV services are, in effect, consumers of the authorised outsourcing agency. As a result, the authorised outsourcing agency of a particular country shall attain a de-facto monopoly status in the market as they are the sole facilitators for administering CPV services for that country.

VFS’ global footprint

In this background lies VFS Global, a leading outsourcing and technology service provider which supports 69 governments, has over 3,485 application centres in 153 countries and has processed more than 299 million applications since 2001.

As per the data published by the Ministry of External Affairs of India, 27 services from 30 countries have been outsourced to VFS Global. In contrast, its competitors hold much smaller shares: 17 services with BLS International, 10 with IVS, 4 with SBI, 2 with IGCS, and 1 with Shahir Travel Agency. Thus, it is evident that not only is VFS Global a de-facto monopoly for processing CPV services of those countries where it is appointed as the exclusive outsourcing agency, but it is also the most preferred choice for governments as the market of CPV services appears to be very concentrated.

Competition concerns

We have discussed how consumers are locked into using VFS Global’s services by virtue of it being the sole authorised outsourcing agency appointed by multiple countries. However, this situation does not inherently constitute a problem.

Antitrust laws in India do not adhere to the notion of "Big is Bad." Pertinently, the issue arises only when the entity abuses its dominant position. In this regard, Section 4 of the Competition Act, 2002, penalises a dominant entity for employing abusive tactics such as imposing unfair or discriminatory conditions, limiting scientific and technical development, denying market access to competitors, engaging in tying and leveraging.

A closer look at VFS Global is warranted. The company has been at a receiving end in Dr. Sardari Lal Verma vs V.F.S. Global Services Pvt. Ltd. case where it was said to be deficient in providing services on account of failure to make the visas available even when the complainant opted for the Priority Visa Service. Various other complaints have been reported which pointed out its inefficient services, high fees, poor website interface and excessive promotion of premium services and in-house offerings.

Nevertheless, the market is tilted in the favour of VFS Global. This leaves consumers with no choice but to accept inflated prices regardless of the quality of services. Combine this with the need for timely processing of visa applications and the ‘consumer harm’ caused is worsened.

Competition law allows probe of exclusive contracts

Further, as these outsourcing contracts constitute to be exclusive agreements, they can also be scrutinised under Section 3(4) of the Competition Act, 2002 which deals with prohibiting anti-competitive vertical agreements. In this manner, it becomes imperative to assess the appreciable adverse effect of these contracts on the competition and adjudge whether the resultant creation of a de-facto monopoly which receives no competition from any player in the market is justified or not.

Competition law has long embraced the ideology of 'Consumer is King’. It is presumed that a dissatisfied consumer will exercise its choice and switch to a superior competitor. However, if the alleged monopoly is mandated by law, then the consumer choice may get restricted, effectively locking them into using the monopoly's services which may be subpar in quality. Given this rise of a de-facto monopoly in a private market with functions akin to sovereign nature, it is high time for the Indian competition authority to intervene in the market and act swiftly to investigate anti-competitive practices of the company concerned.

(Sudhanshu Kumar is associate professor of law at the NLSIU, Bangalore. Nikita Koradia is assistant professor at Nirma University and adviser at the Centre for Competition Law and Economics.)

Views are personal and do not represent the stand of this organisation.